Don Macpherson: The 'fiscal imbalance' among Quebec taxpayers and voters

The bulk of Quebec's personal income tax, the government's largest source of revenue, is paid by a small minority of taxpayers and voters.

Don Macpherson

Updated: April 29, 2015

Quebec Finance Minister Carlos Leitao, centre, is applauded by members of the government as he presents the provincial budget Wednesday, June 4, 2014 at the legislature in Quebec City.Jacques Boissinot / THE CANADIAN PRESS

Next Tuesday is the new, extended deadline for paying the Quebec government what you owe in income tax for last year — if you’re among the half of all Quebecers who actually contribute to the government’s biggest source of revenue.

And if you’re among the Quebecers who pay most of the personal income tax — that is, the “rich” ones with total incomes of at least $50,000 — there are even fewer of you. A lot fewer.

Quebec politicians complain of a “fiscal imbalance” between Ottawa and the province, by which they mean that Ottawa collects more money than it needs to meet its responsibilities, leaving less for the province. But there’s another fiscal imbalance within Quebec itself.

It’s well known in Quebec that overall, the province is among the most heavily taxed jurisdictions in North America. But its tax burden is not evenly distributed.

Every Quebecer who buys anything pays tax (or is supposed to), in the form of the Quebec sales tax.

But the QST brings in only about half as much money as the government collects in personal income tax, its biggest source of revenue. For the current fiscal year, personal income tax will provide 35 per cent of the government’s “own-source” revenue — that is, revenue that it collects itself, without transfers from Ottawa. (The rest comes from sources including the health “contribution,” corporate and other taxes, and revenues from government businesses such as Hydro-Québec.)

The personal income tax is “progressive,” meaning that low-income earners pay little or no tax, and the rest pay tax at rates that increase rapidly with income.

In 2011, the last year for which the finance department has published its annual statistics on taxpayers, 6.4 million Quebecers filed income-tax returns.

Only 4 million of them, however, ended up having to pay any income tax after the deduction of tax credits.

Over the years, successive Quebec governments have exempted more and more low-income earners from having to pay income tax. This has increased the burden on those who still do.

In 1980, 24 per cent of the individuals who filed income-tax returns didn’t pay any tax. By 2004, that proportion had increased to 41 per cent. It has since settled back to about 37 per cent.

And the remaining taxpayers with incomes below $50,000 pay relatively little tax. In 2011, they made up 76 per cent of individuals filing income-tax returns, but paid only 23 per cent of the tax.

The remaining 77 per cent of the tax was collected from the 1.6 million with incomes of at least $50,000.

That amounts to about one-fifth of Quebec’s total population of 8 million in 2011, and about one-third of those of working age, providing about three-quarters of the government’s largest source of revenue.

This lopsided distribution of the tax burden affects the province’s politics.

The 1.6 million individuals who paid about three-quarters of the personal income tax in 2011 are the equivalent of 26 per cent of the 5.9 million eligible voters in the following year’s general election.

So in effect, about three-quarters of the eligible voters in that election were being heavily subsidized by the other quarter, which paid three times as much income tax.

No wonder, then, if Quebec voters prefer that their politicians maintain spending on services rather than cut income taxes, as the Couillard government has promised.

Defenders of the “Quebec model” of government say the province has made a “choice of society” to provide more generous social programs. And generosity is an admirable trait, in a society as well as in individuals.

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